Tallon - Pre-negotiation: a strategy for winning

From a graduate background in law and business, Carol Tallon became the managing director of Buyers Broker Ltd., Irelands only property buyers agency franchise, in 2006.

Carol is best known for her regular articles, media and radio features as the Irish property buyers champion and is the author of the Irish Property Buyers Handbook 2011, the essential guide to buying residential property in Ireland. She is also the author of the NuBook Competitive Intelligence: The Key to Strategic Advantage A Guide for Small Business Owners.

Carols passion is for niche businesses and she is a speaker and panellist on the topics of entrepreneurship, competitive intelligence and business strategy.

Pre-negotiation is a heightened, or (arguably) more aggressive, form of research that may be carried out by either party to a negotiation, in advance of that negotiation. The applicability and effectiveness of pre-negotiation depends on the subject matter of the negotiation. For example, it is extremely effective when purchasing high value items like property or cars or, perhaps, even when looking for a new job; however, it is difficult to employ successfully in a family law settlement or in any similarly-mediated negotiations.

The strongest negotiation tactic available is to be able to read people and situations. This ability to do this comes from real-life interactions rather than theory, as each encounter enhances the negotiators skill. However, advantage in negotiations also comes from preparation, as thorough research can give a would-be buying negotiator an edge. Further, when dealing with a professional negotiator for example, a car deal or estate agent their advantage of experience can be offset by the advantage of a potential sale that you bring for them.

Your first step as a negotiator is to rid yourself of any preconceptions or mental blocks that you may have. Negotiating should not be feared, it is simply a part of the commercial process and, like all processes, it requires input and some level of focus to achieve positive results.

In preparation, you need to research the subject matter thoroughly and speak to as many people as possible. For example, if you are buying a house, find out about the circumstances of the seller. If you are buying a car from a dealer, find out the scheduling of bonus payments and target dates will a better discount be negotiated at the end of the quarter to help push the car dealer or sales person over their target? This might seem like a daunting task at first but you will find that information is plentiful the key is to ask the right questions.

Note that negotiation as a term covers any form of deal-making and not all so-called negotiation is adversarial. In fact, the most successful negotiators bring the other party along with them, encouraging buy-in and working together to create a solution. By using the pre-negotiation strategy, you give the other party to the negotiation the opportunity to work together with you to achieve a deal. It requires a certain confidence and natural skill as it involves a degree of persuasion, but this confidence and skill can developed over time with experience.

Lets look at two examples of pre-negotiation in practice.

A car dealer has two key functions:

• Sales
• Negotiations.

In the first, the dealer must attract potential car buyers to his / her business by using a range of marketing techniques, including special promotions or discounts. Unless this works, the car dealer has no pool of potential buyers and, thus, no opportunity for negotiation and, ultimately, no deals. So, without sales, leading to negotiations, there is no chance of a deal being brokered.

As a car buyer, you now have an opportunity to turn this simple reality of commercial life into a negotiating advantage. This involves starting your negotiations while the car dealer is still in sales mode, knowing that if the dealer is not successful in sales, he will never advance to the stage of real negotiations.

Suppose you spot a car dealers advertisement in a local paper offering a further 15%, for two days only, off all pre-owned cars in stock, together with a list of the stock and prices. You also spot a car that interests you, listed for 24,000 before the discount. You only have access to 18,000 but, given that it is a slow time in the used motor trade and the dealer already is offering a 15% discount, you wonder whether a deal could still be struck.

So you contact the dealer by phone and set out the position honestly, as it is. You want the car priced at 24,000 but you can pay only a maximum of 18,000. That is your maximum figure, not necessarily what you will commit to paying. And it does not constitute an offer. The dealers immediate response may be negative if so, thank him / her for their time and hang up. Nothing lost but a few short minutes.

However, if the dealer needs to raise cash quickly (the hint may be in a timed offer), then perhaps 18,000 may be better than nothing. If the dealers response is positive, you are assured of a bargain without even driving to the showroom!

The advantage for you as a buyer is that you do not waste time; you can find out whether there is a deal to be done without visiting the dealer. Equally, the advantage for the dealer is that he does not have to waste time showing you the car and offering a test-drive if the figure of 18,000 is unacceptable. On the other hand, if it is acceptable (however reluctantly), the dealer is suddenly on his way to a quick sale.

The crucial element here is follow-through if the dealer rules out the 18,000 and you go and view the car regardless, all your pre-negotiation efforts would be lost. This begs the question as to why the car dealer would accept a low non-offer over the telephone. The answer is very simple: if he genuinely can sell at that price and has little prospect of a higher competing offer, then he has to agree or the buyer will not even come into the showroom. As pointed out earlier, if the buyer never views the car, then the dealer has absolutely no chance of a sale but, by co-operating in this way, through pre-negotiation, the dealer stands a strong chance of a sale. It goes without saying that any higher competing offers would see off the pre-negotiated sum but, in their absence, the dealer sells the car and the buyer gets a bargain.

This type of deal or this level of discount is unlikely to be achieved if a buyer merely walks into a showroom, selects a car and tries to haggle on price.

When it comes to property transactions, many people consider these negotiations in particular to be fraught with dangers for the buyer inexperienced in negotiating.

Traditionally, enthusiastic buyers view many properties and return for repeated viewings of a house that they love. Property negotiations then take place over a series of tense conversations after an opening offer has been made by an emotional buyer to a confident, professional property negotiator. It is no coincidence that this is the part of the buying process where the relationship between estate agent and buyer generally breaks down. The resulting antagonism is attributable to the buyers lack of understanding of the estate agents role in the buying and selling of property that is, the estate agent has no role in buying. The agents sole objective is to represent the interests of the seller (their client, the party who engages the estate agent and subsequently discharges their fees), by achieving the highest possible sale price.